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Election Drags on Brazil Growth, Says Ex-Wall Street Banker

(Bloomberg) -- Uncertainty over the outcome of the October presidential race is beginning to weigh on Brazil’s economic growth, former finance minister and presidential hopeful Henrique Meirelles said in an interview.

Retail sales surprisingly contracted in February and economists have trimmed their 2018 growth estimates for two consecutive weeks to 2.8 percent, according to the latest central bank survey. That compares with the government’s 3 percent forecast.

"No doubt there’s a warning sign, concern with the election," Meirelles said in an interview at his residence in Brasilia. "Companies, people, investors will start looking at opinion polls, which is normal."

Among the top nine presidential hopefuls, Meirelles is one of the candidates investors feel most comfortable with. Yet he ranked a distant fifth in the latest Datafolha poll published at the weekend, with no more than 2 percent of voting intention. Leading the poll is leftist former President Luiz Inacio Lula da Silva, who’s in prison and likely to be barred from running. The runner-up is former Army captain Jair Bolsonaro, who says his understanding of the economy is very basic.

"Totally foreseeable, within expectations," the 72 year-old former Wall Street executive and ex-central bank chief said of his performance in opinion polls, adding that the campaign doesn’t really start until August. "There’s been no campaigning yet."

Continuity Over Uncertainty

Meirelles bets Brazilians will recognize his effort in pulling the economy out of its deepest-ever recession and choose government continuity over change and uncertainty. He says he would keep his successor Eduardo Guardia as finance minister and continue pushing his unfinished reform agenda, which includes overhauling an unwieldy tax system and capping pension outlays.

"We will continue with a plan that’s already under way," Meirelles said. "We need to keep Brazil and the economy on the right track."

Earlier this month Meirelles joined President Michel Temer’s PMDB party and stepped down as the country’s economy chief, as required by law to run for president. The PMDB hasn’t yet decided who will be its candidate but Meirelles says internal polls show he is the party’s preferred name.

His main objective for now is to consolidate that support and remain in the public spotlight. On Monday he was shaking hands at an Evangelist church in his home state of Goias. On Tuesday he’s speaking to bankers in Sao Paulo.

Asked whether he was concerned about the recent heckling of Brazilian public authorities, Meirelles said he’s well received wherever he goes. "People even printed a baseball cap saying ‘Brazil has a problem - call Meirelles’," he added, laughing.

In a separate interview published by Exame magazine later on Tuesday, the former finance minister says he is opposed to the legal shield enjoyed by many elected politicians that prevents them being tried by lower courts. Corruption among Brazil’s political elite is likely to play a key role in this year’s elections.